As tax credit lenders and consultants, we see it all the time – sloppy production accounting – and it’s costing the independent film industry tens of millions of dollars each year.

A typical receipt weighs in at about .16 ounces. The equivalent amount of gold is worth $368. At a 30% incentive rate, a receipt for about $12,000 in qualified spend is quite literally worth 10x its weight in gold.

Here’s the scenario, Producer Pete decides to film in State A, which offers a 30% credit on qualified spend. During 6 weeks of production in State A, Pete pays all crew through a payroll company and racks up millions in direct vendor and loan-out spending. The production accountant enters every transaction into the accounting software, saves critical records like bank statements, contracts, W-9s and 1099s, and then hands-off accounting materials to the post-accountant so that he can move on to a film in State B.

The post-accountant picks up where she thinks the production accountant left off, wraps up final payments through post, and then is asked to prepare the materials to be audited by State A. This is where a problem begins to arise.

It turns out that during the frenetic photography period, when the accountant was dealing with payroll deadlines and funding crises, he lost track of about 10% of the invoices and receipts. Even worse though, he didn’t realize that he was supposed to collect business registration forms from vendors. And now the auditor is asking for all of the missing support in order to have the tax credits certified and sold.   No receipt, no invoice, no business registration – NO TAX CREDIT.

To add to the problems, the production accountant is now in State D, 3 films removed from Pete’s and has little time (or memory) to devote to finding missing documentation. The effort that will be required of the post-accountant, producers and tax credit consultants can last months (or would you believe even years – yep, we’ve seen it!), during which time Pete will be incurring additional accounting, incentive consulting and interest costs.

Did I say that receipts were worth their weight in gold? Maybe more like platinum.

Pete may have saved a few bucks by not hiring a tax credit consultant from the outset and by skimping on the production accounting, but that’s nothing compared to what he’s going to lose as a result.